With property prices peaking in Sydney, the Queensland property market is really starting to heat up as property investors from down south look to the sunshine state for its more affordable property market that can prove to be a more lucrative investment. Our conveyancing solicitors have really started to notice this swing and the influx of investment properties coming across our desks.
We deal with a lot of clients who are new to the property market; either purchasing their first or second investment property. What we’ve noticed though is that a lot of property investors are not aware of the opportunities that are available to them to claim allowances on the property when it comes to tax time and really get the most out of their investment.
There are potentially thousands of dollars worth of deductions for depreciation on the property that are available to an investor if they have their accountant do their homework and use the correct tax code for the investment property. Recent estimates have shown that as many as 80% of property investors in Australia are not maximising their possible income tax benefit in regards to the depreciation allowances available to them.
The utilisation of these allowances could potentially unlock thousands in tax refunds that could be further invested or used for capital improvements of the property.
Depreciation refers to the loss in value of the asset over time and when it comes to property this refers to the ‘useful life’ of the property, or how long it is expected to be used, which could potentially be between 30 and 40 years, depending on the property type and when it was constructed.
Where property has been purchase for the sole purpose of earning an income and the property is tenanted full-time, the current tax legislation allows for the claiming of deductions for depreciation against taxable income.
Most investment properties qualify for some for of allowance, with depreciation rates differing by what exactly is being claimed, but for fixtures of the property this depreciation can be anywhere between 5% and 100% per year, while for capital works and improvements to the property’s structure these depreciate at between 2.5% and 4% per year.
Some possible things that can be claimed include fixtures such as flooring, kitchen appliances, hot water systems and air-conditioners, while general renovations or additions can be claimed as a structural improvement to the property.
If you are looking to purchase an investment property on the Gold Coast, or in Brisbane, it may be well worth having a conversation with your account about the tax deductions you could access when it comes to the depreciation of the property. An accountant will be able to provide a depreciation report from a surveyor for the specific property and planned improvements which can be used to calculate tax deductibility.